What’s next for Britain’s banks?

It has been a turbulent month for the financial sector, especially in terms of its reputation.

As Bank of England governor Sir Mervyn King predicted in January, the awarding of hefty bonuses to senior bankers has sparked outrage among politicians and the general public alike.


“I think the reputation of those institutions will be affected if their senior executives reward themselves, particularly in a period when the banks, in terms of their share prices, have hardly been stellar,” he warned.


The catalyst for what Chancellor George Osborne termed “bonus bashing” was when Royal Bank of Scotland chief Stephen Hester was awarded a bonus payout of nearly £1 million.


London Mayor Boris Johnson branded it “bewildering”, Ed Miliband said it was a “disgraceful failure” of leadership by the Prime Minister and shadow business secretary Chuka Ummuna said that Mr Hester was being rewarded for simply doing what was expected of him.


Mr Hester eventually agreed to forego the payment, and later admitted that the intensive scrutiny which he faced and made him want to resign.


However, RBS still did not manage to escape the media glare after revealing that, despite posting a £2 billion loss in 2011, it would still be distributing a bonus pot worth nearly £1 million.


Unite national officer David Flemin warned that the 83 per cent state-owned bank’s decision would “infuriate the workforce”.


Chief executive of Lloyds Banking Group Antonio Horta-Osorio agreed to forego his own bonus earlier this year, but has come under pressure to hand back part of his signing bonus as 13 other directors are set to have their bonuses clawed back.


Lloyds announced that it would strip around 32 million from its executives following its £3.5 million loss that resulted from payment protection insurance (PPI) miss-selling scandal.

Politically, reactions to the controversy surrounding banker bonus payouts have been varied.

Labour leader Ed Miliband called on banks to end their “culture of excessive bonuses” or risk being isolated from the rest of UK society.


In contrast, George Osborne argued that the continued “bonus bashing” would result in the UK becoming an anti-business culture which could drive international companies away.


This was echoed by David Cameron, who shortly thereafter promised to put an end to what he termed “anti-business snobbery”.